The “Perception vs. Reality” of Cost Effective Customer Acquisition
If you’ve read the first few articles you’ve probably noticed that we seek outside the box solutions. I believe this mindset is absolutely critical for startups and companies with limited capital. In line with this philosophy, our new approach to customer acquisition will revolutionize the mobile gaming market. The road most traveled doesn’t work forever. Coasting along with copycat solutions merely accomplishes the following:
- You will maximize your chance of receiving similar results as your competitors. A crowded marketplace demands innovation to distinguish you, your company, and your product from the competition.
- You will minimize your chance of creating long term success with a unique selling position (USP).
Without ingenuity in customer acquisition, you must either increase intrinsic product value or outspend your competitors through expensive marketing. Most rising companies simply don’t have the capital or resources to execute either of these options on a long term basis.
Specifically in the mobile gaming space, the largest barrier to success is cost effective customer acquisition. According to Newzoo’s “2017 Global Games Market Report”, an average of $2.90 in marketing costs yields one consumer download. This may not seem like a lot, but it could take up to four-hundred downloads to get one person to spend money in your game. Furthermore, this doesn’t guarantee recurring investment. You could end up spending over a $1000 to garner a single $0.99 purchase.
Given the necessity of exorbitant capital expenditure, it’s not surprising that giant companies dominate and drive smaller game developers into extinction. Disrupting the current state of the industry without a multi-million dollar advertising budget demands pure innovation. While our unique gaming platform itself boasts ingenuity and innovation, how do we compete against huge companies on a limited marketing budget?
The answer to that question was not an easy one, and we had to operate outside the proverbial box to solve this seemingly insurmountable problem. The answer doesn’t just make perfect business sense but is the only solution that remains true to our mission of creating the ultimate gaming community.
In the past, attempted innovation in the mobile gaming market solved the challenges associated with customer acquisition by mining the social connections of each of their users. With their flagship app, Candy Crush, King Entertainment successfully capitalized on this technique by providing players additional lives in return for flooding their friends and followers with relentless game invites. A handful of digital lives with no real dollar value created a viral sensation, and King Entertainment became a multi-billion dollar giant. It was a clever maneuver and an incredibly powerful customer acquisition model, but it doesn’t work for us at Game Loot. King Entertainment’s process, while effective, exploits the customer’s network without sufficiently rewarding them for their time and resources.
Then, it hit me. What if we could track every user’s social connections and the revenue generated by each of those connections? We could directly reward users for every penny generated by their personal network.
This would be a much bigger task than simply plugging in Facebook’s API to generate automated game invites. We would have to track every transaction from each social connection, calculate the specific rewards from every referral, give users a way to view those rewards in real-time, and provide a mechanism for them to withdrawal those rewards quickly and easily. Whew! It sounded like a great concept, but actually executing this would be a monstrous challenge with no roadmap to follow.
Hammering out the technical aspects of such a platform would simply be a matter of time and collective brainpower. The more important question became how to create and cultivate an engaged community, one to embrace a partnership which tested and evolved our collaborative concept. This could not just be a simple database of test users. We had to create culture and a community with a battle cry. We needed people with genuine passion for the next big thing, those who crave the cutting edge. The people who would choose to participate would be much more than gamers. They would be partners in our mission. It was a lofty goal, but there were two viable strategies. It seemed either online affiliate marketing OR multi-level marketing could allow us to reward and engage users in the way we wanted.
Online affiliate marketing is a great approach for many burgeoning companies. It is a simple and proven methodology, but affiliate programs function within a narrow scope. It requires either a polished finished product/service OR a very straight forward product. Our concept had to be tested and had to evolve based on community feedback and behavior. It required members to participate as stakeholders, not solely as test users or data points. Another flaw in this methodology, is that typically affiliates are rewarded only for their base recruits. We wanted to be able to compensate users for the entire impact of their network: the friends their friends enlisted and so on. We realized the affiliate strategy couldn’t work for us.
That left one option, multi-level marketing. However, we now had a huge issue. Many people have an incredibly poor perception of multi-level marketing for a variety of reasons, some of which are entirely valid. On paper MLM sounds fantastic; you join a great community with useful products and receive rewards when you refer others to that community. The problem with multi-level marketing has never been in theory but in execution. MLM companies typically promise quick-bucks in exchange for enlisting others in their program. That program inevitably involves a “product” for you to market, and this product is often overpriced to support the commissions that need to paid when the product is sold. However, what you end up selling isn’t a product at all because the value of the product is typically difficult to justify. This forces the community to sell “the income opportunity”. You convince someone else that they could recruit others and make additional income or perhaps a fortune. The multi-level marketing model has been inundated with such companies who peddle overpriced products, severely tarnishing the concept’s social image. But what if we could take benign theory, remove the disreputable aspects, keep the culture building factor, and apply it to mobile gaming? What if we created an incredibly unique social gaming arcade style platform where members could compete against their friends, make new connections, win prizes, AND have an opportunity to earn rewards that others genuinely wanted to share with others? We could create an enhanced gaming experience with great value, reward our members for getting the word out about Game Loot Network, and allow them to collaborate with developers on games that would be approved by and improved on by the community itself. After all, we want partners not customers.
We knew our vision deserved to become reality, and we chose the path which gave it life. We empower our members with a mission based, community style approach while at the same time building a culture of partnership. Our members have trust and patience because they are stakeholders IN our mission, while being ambassadors FOR our mission.
This approach was not without risk, but given the ‘red ocean’ alternative, the potentially explosive rewards outweighed the calculated risk. The result of our 7 month beta test proved that the rewards were worth the risk. We did over $5.3 million in sales with members enrolling from over 115 countries. The results and growth we experienced during our 7 month beta test were unanticipated and uncontrolled which isn’t great, but it did identify several weaknesses and vulnerabilities. We have since solved these issues over the past 12 months in preparation for our global launch. I’ll cover this in more detail in next week’s blog-entry.
As I was writing this article, I realized how important it was to accurately convey the reasons we chose this strategy. As we enter the final stage of realizing this vision, I believe in our mission more passionately than ever before. Over the past 3 years, we have assembled an amazing team, and the gaming industry stands in a perfect state for us to launch. We have a unique opportunity to not only create the next evolution in mobile gaming but also to prove that perception doesn’t have to be reality.
Stay tuned, as next week I will be outlining in detail every critical stage of our company timeline. I will share the good, the bad, the ugly, how our team adapted, how our strategy evolved, and ultimately how we’ve reached the point we are at today. We’ve emerged heat tempered and battle tested. The biggest lesson I’ve learned over the past several years is that there are no shortcuts to creating a long term paradigm shift. Always, always…enjoy the journey, embrace the process and expect the result.
Lance Baker
President and Founder, Game Loot Network
